The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Of all the half assed companies out there, I cannot for the life of me figure out WTF is going on with Yahoo.

There are some companies that suck, but they do so in a way you almost understand. Delta — “America’s Meanest Airline” — is a perfect example. The airline relentlessly cut costs to the point that if you need customer service, suicide is a preferable option. Delta has the lowest passenger satisfaction, highest flight delays, and highest baggage fees in the industry. (We have been long various airlines this past year).

I understand their suckiness, I get that its actually a cost savings program the company puts into place between bankruptcies.

Yahoo, on the other hand, seems hell bent on destroying their own value as fast as they can, across all of their properties:

Yahoo Message Boards area perfect example. They were once a huge traffic driver, but became so overrun with Spam and penny stock touts as to be all but worthless. And Yahoo owned search as one point in time, before Google steamrolled them.

The latest debacle is Yahoo messenger. I cannot log on without being greeted with a dozen spims (Spam IMs). Its made the product utterly unusable.If i could figure out how to resign from the program, I would — its tied into mail, which is why Yahoo is now my junk mail address.

At one time, I used a ton of Yahoo offerings. Now, I use Yahoo Tech Ticker, a home page, and their email as my junk address. That’s pretty much it — from indispensable to annoying in a few short years . . .

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A dark horse for self-destruction is the usually astute Amazon. They are running a similar risk by allowing their eejit kindle fanboys to pollute the once valuable Amazon rankings.

Consider this extreme example: Of the 519 review of the The Big Short: Inside the Doomsday Machine, 87 are 1 star reviews. Nearly all of them are kiddies whining about the lack of a kindle version. Amazon apologized to Lewis, but left all the irrelevant 1 star reviews posted. (As benevolent dictator, I would impose capital punishment, but that’s just me).

Thus, I no longer waste my time reviewing products or sellers, as the Amazon review system has become corrupted. Its no longer worth my time. I have found myself paying less attention to Amazon reviews, as I now know they are written by eejit children, so their value is far less than I previously believed. Even worse, I know Amazon makes the kindle, so we have bad faith thrown into the mix.

We shall see if it impacts my shopping habits . . .

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Question: What is the next valuable property to allow itself to be devalued will be? Who will somehow take an asset and turn it into a negative?

From Yahoo Travel:

Based on the Airline Quality Rating (AQR) Report, which covers 18 domestic carriers, here is a list of the airlines that could stand to do the most work on making their customers happy. The report’s conclusions are based on surveys of airline industry experts, with positive and negative values assigned to different elements in airline quality.

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Worst Major Airlines
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5. US Airways
2009 AQR Score: -1.19

Rudest flight attendants, worst food, below-average score in the J.D. Power 2010 North America Airline Satisfaction Study.

Domestic Baggage Fees:

1st Bag: $25
2nd Bag: $35 3rd Bag: $100
Overweight Bags: $50 Extra (51 – 70 lbs) $100 Extra (71 – 100 lbs)
Oversized Bags: $100 Extra (larger than 62″)

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4. American Airlines
2009 AQR Score: -1.25

This year AA has had frequent incidents of mishandled baggage with an average of 4.07 reports per 1,000 passengers, according to the Air Travel Consumer Reports (this is the worst rating among the major airlines in the study). SeatGuru’s survey named American Airlines as one of the three airlines that have the rudest flight attendants and the worst food.

Domestic Baggage Fees:

1st Bag: $25
2nd Bag: $35
3rd Bag: $100
Overweight Bags: $50 (51 – 70 lbs) $100 (71 – 100 lbs)
Oversized Bags: $150 (larger than 62″)

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3. Alaska Airlines
2009 AQR Score: -1.39

High number of mishandled baggage reports. However, Alaska Airlines did a stellar job when it came to delays, with 88 percent of its flights having on-time arrivals (in the 12-month period ending August 2010).

Domestic Baggage Fees:

1st Bag: $20
2nd Bag: $20
3rd Bag: $20
Overweight Bags: $50 (51 – 100 lbs)
Oversized Bags: $50 (63 – 80″) $75 (81 – 115″)

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2. United Airlines
2009 AQR Score: -1.43

United received a score of “about average” in the J.D. Power 2010 North America Airline Satisfaction Study but it placed last in passenger satisfaction in the American Customer Satisfaction Index. According to the SeatGuru survey, United joins American Airlines and US Airways as one of the three worst airlines for meals and rude flight attendants. Ranked second in consumer complaints.

Domestic Baggage Fees:

1st Bag: $25
2nd Bag: $35
3rd Bag: $100
Overweight Bags: $100 (51 – 100 lbs)
Oversized Bags: $100 (larger than 62″)

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1. Delta
2009 AQR Score: -1.73

Delta had the worst AQR among major airlines with a -1.73, and a couple of its regional airlines did even worse (see Comair and Atlantic Southeast below). It also had the largest drop in passenger satisfaction in the American Customer Satisfaction Index. According to the Air Travel Consumer Reports, Delta was number one in delays for major airlines (78 percent of flights arriving on time in the 12-month period ending August 2010) and first in consumer complaints (averaging 2.23 per 100,000 enplanements in 2010). Also, make sure to note Delta’s baggage fees below, as they can get quite painful for those hauling heavy and/or large cargo.

Domestic Baggage Fees:

1st Bag: $25 ($23 if checked online)
2nd Bag: $35 ($32 if checked online)
3rd Bag: $125
Overweight Bags: $90 (51 – 70 lbs) $175 (71 – 100 lbs)
Oversized Bags: $175 (larger than 63 – 80″) $300 (larger than 81 – 115″)

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Source:
America’s Meanest Airlines
Hamooda Shami
Yahoo Travel    
http://travel.yahoo.com/p-interests-36360593

Yet another of our brutal mortgage linkfests: Investors are beginning to sue, there are protest over HAMP, and foreclosure probes are happening.

Here’s our round up:

• COP Hearing on TARP Foreclosure Mitigation Programs:  On Wednesday, October 27 at 10:00 a.m., the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP) held a hearing in room 138 of the Dirksen Senate Office Building. Archived video is available below. (Note: Karl Denninger picks out choice parts)

• Which Banks Have Mortgage Risk?: An Analyst Estimates

• The WTF headline! MERS casts its shadow on commercial mortgages (FT)

• Federal Reserve on Foreclosure Crisis (PDF)

• Brooklyn judge Arthur Schack is a local hero, decision casts light on fraudulent mortgage paperwork (NYPost)

• Why Did Banks Give Home Loans to People Who They KNEW Couldn’t Pay?

• To fix the economy, let bad banks die (LATimes)

• Home Builders Slash 2010 Construction Forecast

• U.S. probing foreclosure processing firms uses the criminal word…  (Washington Post)  Law enforcement authorities on both state and federal levels are probing whether individuals at these foreclosure companies and at the banks that hired them committed an array of possible crimes – mail and wire fraud, money laundering, conspiracy and racketeering. No charges have been filed. These officials say they are taking a well-tested approach in their investigations: press low-level employees to implicate higher-up executives. Already, investigators have obtained in sworn testimony detailed descriptions of what took place inside the foreclosure companies.

• Home Lenders May Meet With States Over Foreclosures This Week

• Bond Investors Will Complain to Trustees Over Paying Cost of Robo-Signing Mortgage-bond investors (with more than $500 billion of the securities) represented by Dallas lawyer Talcott Franklin will send letters to securities trustees complaining that they shouldn’t bear the costs of loan servicers’ so-called robo-signing. They are “pretty disturbed” that mortgage-bond trusts are being forced to pay penalties after loan servicers including Detroit-based Ally Financial Inc. filed affidavits in foreclosure cases that falsely said the signers reviewed documents, he said.

• Profile of foreclosure defense legend Max Gardner (Bloomberg)

• Allan Sloan: The real foreclosure mess: Lack of accountability for banks (Washington Post)

•  HAMP Protests

• Mortgage scandal boosts investors’ campaign to get banks to buy back securities: Once run by a loose group of hedge funds, the investors’ campaigns have bulged in size in recent weeks, turning them into a force that could recoup tens of billions of dollars from Bank of America and other large lenders and act as a major drain on their earnings. Previously, this group struggled to force the banking industry to hand over data critical to their lawsuits. Now with the Federal Reserve Bank of New York, the regulator of mortgage giants Fannie Mae and Freddie Mac, and some of the world’s largest funds on board, the investors may be able to compel banks to reveal more about their lending practices

•  Washington Post: Economists: U.S. should remove top bank execs over foreclosure mess

•  Assured Guaranty Sues Deutsche Bank Over Mortgages:  Assured said more than 83 percent of 1,306 defaulted loans examined in one of the transactions, ACE’s Home Equity Loan Trust, Series 2007-SL2, breached Deutsche Bank’s representations and warranties. In the second deal, Home Equity Loan Trust, Series 2007-SL3, 86 percent of the 1,774 loans breached the agreements, Assured said.

• Faulty Foreclosures, by Adam Levitin

•  Bank of America Mulls Dividend Hike

• Homeowner says Stern sent retaliatory letter: A lawyer for a homeowner who went to Florida’s attorney general about a law firm’s conduct in a foreclosure case claims the firm sent his client a “discriminatory and racially degrading” letter to frighten him into dropping the complaint. The letter, which the homeowner asserts emanated from the Law Offices of David J. Stern in Plantation, was filed with a counterclaim to a foreclosure action brought by CitiMortgage in Miami-Dade Circuit Court.

Any thing else worth seeing?

Fed Foreclosure

Oct. 27 (Bloomberg) — Bob Janjuah, co-head of cross-asset allocation strategy at Nomura International Plc, discusses the outlook for the global economy. Janjuah, speaking with Erik Schatzker on Bloomberg Television’s “InsideTrack,” also talks about the potential impact of further quantitative easing by the Federal Reserve on the U.S. economy, emerging-market valuations and expectations for the Standard & Poor’s 500 Index.

Source: Bloomberg

It’s been a while since I paid over $3.00/gallon for gas, but had that pleasure once again very recently, as prices have been creeping slowly ever upward.  As the gas flowed, I thought back to a piece I’d written elsewhere some time ago (April ’06, to be exact) lamenting the fact that those who had gotten it wrong on just about everything else had gotten it wrong on oil, too.  So, as oil holds over $80/barrel and gas inches higher, here’s another look in the time machine at what the Very Serious People were saying almost eight years ago (emphasis mine):

Bruce Bartlett, National Review, March 2003

“…markets clearly expect lower prices. On the eve of hostilities, oil was selling for about $37 per barrel. At this price, Americans would be paying $270 billion per year for oil. But once it became clear that Iraq’s liberation was at hand, the price quickly dropped to about $28 per barrel, cutting our annual oil bill by $70 billion. With full Iraqi production, the price might drop to $20 per barrel or less, giving us the equivalent of an annual tax cut of about $120 billion per year. And this is a tax cut the entire world benefits from.”

Rand Corp analysis, January 2003

“Under a free market, oil prices would probably fall to between $8 and $12 per barrel over the next 10 years — down dramatically from today’s price of about $25 per barrel.  [...]  A major decrease in petroleum prices would boost U.S. and global economic activity. Home heating oil prices would drop by at least a third. Gasoline prices would drop to less than $1 a gallon. As a result, people and business in the United States and throughout the world would spend far less for fuel. From an economic perspective, the United States and many nations around the world would clearly win.”

The Heritage Foundation, March 2003

“An unencumbered flow of Iraqi oil would be likely to provide a more constant supply of oil to the global market, which would dampen price fluctuations, ensuring stable oil prices in the world market in a price range lower than the current $25 to $30 a barrel. Eventually, this will be a win–win game: Iraq will emerge with a more viable oil industry, while the world will benefit from a more stable and abundant oil supply.”

The Wall St. Journal (link no longer available):

“Of course, the largest benefit–a more stable Mideast–is huge but unquantifiable. A second plus, lower oil prices, is somewhat more measurable. The premium on 11.5 million barrels imported every day by the U.S. is a transfer from us to producing countries. Postwar, with Iraqi production back in the pipeline and calmer markets, oil prices will fall even further. If they drop to an average in the low $20s, the U.S. economy will get a boost of $55 billion to $60 billion a year.”

There were numerous other forecasts in the $18 – $28/barrel range.  Of course, the Very Serious People continue to hold sway in our national discourse on a host of issues (austerity now now now!).  I’m not sure exactly why, but they do.  It’s important to keep an accurate historical record — a chronology — of who said what, and when.  Not that anyone’s ever called to task, but so the record is clear.

Mike Panzner points out that the disconnect between the sentiment on Wall Street and Main Street, looking at the SPX versus Consumer Confidence Survey:

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click for larger chart

Bloomberg Television’s Chief Washington correspondent Peter Cook interviewed Treasury Secretary Timothy Geithner in Gyeongju, South Korea yesterday– the embargo on the interview was lifted this AM.

Source: Bloomberg News

Read the rest of this entry »

Jeremy Grantham has some fun at the Fed’s expense:

The Ruinous Cost of Fed Manipulation of Asset Prices: My diatribe against the Fed’s policies of the last 15 years became, by degrees, rather long and complicated. So to make it easier to follow, a summary precedes the longer argument. (For an earlier attack on the Fed, see “Feet of Clay” in my 3Q 2002 Quarterly Letter.)

Purpose: If I were a benevolent dictator, I would strip the Fed of its obligation to worry about the economy and ask it to limit its meddling to attempting to manage inflation. Better yet, I would limit its activities to making sure that the economy had a suitable amount of liquidity to function normally. Further, I would force it to swear off  manipulating asset prices through artifi cially low rates and asymmetric promises of help in tough times – the Greenspan/Bernanke put. It would be a better, simpler, and less dangerous world, although one much less exciting for us students of bubbles. Only by hammering away at its giant past mistakes as well as its dangerous current policy can we hope to generate enough awareness by 2014: Bernanke’s next scheduled reappointment hearing.”

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click for PDF

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Source:
Night of the Living Fed
Jeremy Grantham
GMO, 10/26/2010
http://bit.ly/aPD4va

The days are getting shorter in the Northern latitudes. I don’t suffer from Seasonal Affectation Disorder, but I know plenty of people who do.

Which is why I thought this doohickey from Finland (from a start up called Valkee) was so interesting. It works by beaming a specific frequency of light into your brain — not through your eyes, but rather, via your ears!

From the company website (translation may be a bit clumsy):

“A new way to prevent and treat seasonal affective disorder. Reduced exposure to light affects all of us. Symptoms are ranging from mood swings to the more serious seasonal affective disorder. The VALKEE bright light headset increases light exposure easily and effectively by bringing light very close to the brain via the ear canals.

Researchers at the University of Oulu, Finland, have researched bright light headsets since 2008, and are convinced that this is a significant method for the prevention and treatment of seasonal affective disorders and other depression types. Bright light is needed in the brain, not in the eyes

The brain has photosensitive areas that react differently to the lack of light, resulting in depression and mood conditions. These areas can be cured with bright light. Surprisingly our eyes are not the most effective route to deliver light to the brain: the ear canal, where the skull at its thinnest, is the most effective route to direct light to where it is needed.

Its a shame they can’t pump music thru at the same time — even better, have the iPhone into cranking out light into your head.

SAD? There’s an app for that!